Singapore is an island city state 26 miles long by 14 miles at its widest point, with a land area of 240 square miles, approximately the size of Washington D.C. The population of 3.3 million including permanent residents and foreigners is growing. Singapore has virtually no unemployment and imports about 450,000 Malaysian workers (commuters) daily. According to Philip Yeo, Chairman of the Economic Development Board (EDB), Singapore's goal is to "Provide our youth and future generations with meaningful jobs, a high standard of living, and a quality of life second to none."
Singapore's strategy to improve the population's standard of living is to utilize foreign trade and to continuously increase its GDP. The leaders have developed a comprehensive plan to diversify the economy into greater-value-added products and services. They continue to identify emerging industries that they can target for growth and areas where they can leverage their resources. Their integrated strategy (Fig. 4.1) supports continued growth in GDP. The government has built a solid economic base and long-range plan ("E 2000") to support continued development.
Fig. 4.1. Integrated strategies for economic development.
The government has set very specific goals for annual growth of 8% in GDP, with manufacturing at 25% of total GDP. The GDP increased 9.9% in 1993, 10.1% in 1994, and 8.5% in 1995. Singapore's per capita income is approximately $22,000.2 Singapore was the United States' ninth-largest export market ($15 billion) in 1994. The country boasts one of the world's most highly developed industrial, commercial, financial, and consumer economies. Major exports are refined petroleum products, electronics (primarily disk drives and computer-related products), and services. Inflation remains low at 2-4%, and 1994 new investments totaled $2.4 billion.
Singapore's infrastructure supports continued economic development. Its telecommunications system is completely digital and uses the most modern technology. There is already fiber in every home, which is reflected in Singapore's reputation as the "intelligent island." Individuals are surfing the Internet on T1 cables. Singapore boasts an extensive road network and a modern mass transit system that utilizes bus, train, and light rail systems to serve major business, manufacturing, shopping, and residential areas. Its deep seaports and airport are ranked among the world's best facilities. Centrally located in Southeast Asia, Singapore provides a focal point for commerce, development, and communication activities among ASEAN countries. In concert with Malaysia and Indonesia, Singapore has established stable but increasingly expensive regional supplies of power and water.
Singapore has focused the entire country's organizational structure to support its growth. Every institution, from parliament to the finance and capital markets, from educational institutions to the transport authority, share common goals. They have created monetary exchange control regulations that are business-friendly but regulated. They offer attractive tax incentives for promoted investments ranging from pioneer status (partial exemption from income tax payments) to investment tax allowances. Rebates, deductions, R&D training, and incentive programs for skills training are many, and taxation has steadily been reduced over the last five years, with Singapore's tax rate being the lowest in the region. Recently the government has introduced a general service tax (GST), which is a value-added tax system; this is expected to further reduce overall taxation on the individual as well as corporations. Capital gains are not taxed, nor are citizens who are stationed overseas.
Recognizing that future growth will depend upon overcoming resource limitations and a small domestic market, Singapore's government has taken the following key strategic steps:
A shortage of labor is leading Singapore to cooperate more fully with its neighbors, transferring labor-intensive operations out of Singapore and upgrading its own level of technology and labor.
The government of Singapore is preparing the workforce for the future through industrial and educational cooperation. The government works to increase research efforts within universities for industrial research. The government has used incentives to attract multinationals and their technology and to increase the skills of the local workforce. Industry provides the monetary support and establishes R&D facilities that help train students and workers. Industry obtains government assistance in R&D for product and process developments.
As Fig. 4.2 shows, Singapore also recruits technical engineers overseas. Training is a major part of Singapore's strategy for development. If there is a technology that a local company needs, the government will identify a source and bring it into Singapore from anywhere in the world. Technical training includes foreign education, foreign experts, multinational corporate training, and a variety of technical training programs and institutes. All of these activities are supported by the government in order to improve the quality and capabilities of the nation's work force.
Fig. 4.2. Sources of technical know-how.
An integrated and efficient infrastructure (power, water, roads, etc.) allows international companies to move in and set up easily. Singapore competes with capital, not labor. Its capital investment incentives include the following:
Manufacturing incentives in 1994 reached about $1.1 billion, an increase of 49% over 1993. Japan and the United States are heavy investors in Singapore (and Malaysia). Japan's rising wages and high yen value have caused its companies to move offshore. Singapore's ease of investment and technology support has been increasingly attractive since the mid-1980s. In addition, the country's strong and cohesive infrastructure offers investors core competencies in the following areas:
Other countries have asked Singapore to set up and operate industrial parks and economic zones.
Singapore's EDB has $1 billion in a cluster development fund to support the growth of manufacturing GDP and achievement of the country's development goals. These are investments that don't require a return-on-investment justification but are assumed essential for future developments. If a firm has a need for technology, the government will find funding to support it. The Singapore government currently runs a $10 billion budget surplus, so EDB has the funds for such investment.
EDB is empowered to represent the many constituents of the Singapore government, thus reducing the confusion of "doing business" in Singapore. To facilitate investment, EDB works closely with a variety of organizations, including Jurong Town Corporation, JTC (responsible for land and factory space); the Development Bank of Singapore, DBS (responsible for capital and financing); the National Science and Technology Board, NSTB (responsible for technology development and transfer), the Productivity Standards Board, PSB (responsible for standards, measurements, and testing); and the Trade Development Board, TDB (responsible for export trade).
Singapore's government officials view themselves as capitalists responsible for business formation. They have focused on six development strategies: (1) developing industry clusters, (2) making Singapore into a business hub for the region, (3) promoting regional development, (4) developing business councils to recruit industrial partners, (5) supporting evolution of companies into MNCs through product and market developments, and (6) collective marketing to sell Singapore's government, corporate sector, and academic goals.
Twelve business clusters are central to Singapore's business development strategy. The national objective is to generate at least 25% of GDP from manufacturing. If government officials don't maintain this goal, they will lose their jobs. The government established the NSTB in 1991 to develop Singapore into a center of excellence in selected areas of science and technology in order to enhance national competitiveness in both the industrial and services sectors. NSTB's activities support the following clusters:
The Aerospace cluster has now been added to the strategy. Singapore's core service competencies cut across these clusters. Telecommunications, finance, shipping, and insurance support the manufacturing industries. Singapore's information technology supports its shipping activities by allowing it to be the most automated port in the world. In manufacturing, the clusters shown in Fig. 4.3 are central to Singapore's strategic plan.
Singapore plans to become a hub of regional headquarters for the region, and attract higher-value-added activities, which will effectively utilize its relatively small population.
Fig. 4.3. Singapore's core clusters to support manufacturing.
Electronics plays a major role in Singapore's "E 2000" cluster plan. The Singapore electronics industry had a 1995 output of over $45 billion, a growth of 19% from 1994. Electronics accounts for 51% of Singapore's GDP. The electronics industry makes up 43.7% of the total manufacturing output of Singapore. Its cluster includes consumer electronics, communications, semiconductors, electrical supporting industries, computers, and mass storage and peripherals. The electronics industry in Singapore is not growing in the area of consumer electronics, but is growing in the very latest and most advanced products and technologies such as data storage, computing, and wafer fabrication. Fig.4.4 shows the major product segments that make up Singapore's electronics output.
Fig. 4.4. Key electronics sectors, 1995 Singapore economy.
Storage products (hard disk drives), semiconductors, computers, and consumer electronics are the dominant product segments and represent about 76% of the $45 billion in electronics output. Table 4.3 shows the growth of key segments. Between 1994 and 1995, data storage devices grew 20%; semiconductors grew 53%; computers grew 10%; consumer electronics declined 3%; communications grew 34%; office automation products grew 17%; passive components and printed circuit boards grew 10%; display devices grew 21%; and contract manufacturing and others retained the same level of output. Contract manufacturing and printed circuit board production are not cost-effective in Singapore for low-end products and require higher levels of production technologies.
Semiconductors are considered a key enabler for all electronic businesses. EDB has been successful in deploying this technology and is planning for 20 wafer fabrication operations (fabs) to be operating in Singapore by the year 2005. Fig. 4.4 and Table 4.3 indicate the size and importance of Singapore's semiconductor industry. Between 1994 and 1995, semiconductor revenues grew 53% to about $2.2 billion. What is impressive about this growth is that it was zero five years earlier. The infrastructure for the future wafer fabs is in place and ready for development. The American School has been moved near the industrial park for future wafer fabs to encourage Americans families in Singapore to move closer to the industrial park.Table 4.3
The boxes shown in the electronics cluster in Fig. 4.5 represent the strategic products that are needed for future growth: multimedia products, personal digital assistants, direct satellite systems, and set-top boxes for cable and satellite receivers. Communications represents a new growth opportunity, and displays are required for next-generation multimedia products. Government officials are pushing hard to make sure they are growing in those product areas. They ensure that supporting technologies like semiconductors are in place. They see lithium ion polymer batteries as future products that will be available within the next several years. Tantalum capacitors for wireless products and optical mass storage technologies also have been identified as essential technologies for future products. If any company wishes to bring its R&D activities to Singapore to develop these technologies, the government will begin negotiations to fund 50% of the research and development expenses. It is aggressively seeking access to the technologies required for future growth.
At one point in the WTEC trip to Singapore, government officials showed a slide that one of the team members had developed about three years earlier for the U.S. National Electronics Manufacturing Initiative (NEMI) (Fig. 4.6). They were quite capable in explaining it, and it is apparent that Singapore is closely following world technology trends.
Fig. 4.5. Singapore's electronic manufacturing clusters.
Fig. 4.6. NEMI vision of technology deployment.
Singapore has shifted its core competence from just manufacturing to component design. Table 4.4 identifies many firms that have made investment commitments to Singapore's electronics industry. IC fabrication of silicon semiconductors has had the highest priority. Singapore has established the infrastructure to support 20 wafer fabrication facilities by 2005, with designated land, installed utilities, schools, and logistics to support such growth in fabs. Sharp, Siemens, and SGS-Thompson are providing IC designs. IC assembly and testing, photomask equipment, and automation technologies are being developed in Singapore. A number of firms have operations in Singapore for disk media, wireless communications, computers, and other key components. Texas Instruments' research and development and memory manufacturing is all controlled from Singapore.Table 4.4
The WTEC study team visited government agencies and institutes where the brightest graduates are employed. The Singapore Economic Development Board guides and nurtures industrial investments. Leaders in the electronic packaging industry assemble, develop, and conduct research in the region. GINTIC is a government institute of technology which, along with the Institute of Microelectronics, supports manufacturing and technology in electronics. The National Science and Technology Board assures that research activities are linked and relevant to the industry.